ANCHORAGE, Alaska (Reuters) - Alaska Governor Sean Parnell said on Thursday that a plan to build a massive natural gas pipeline from Alaska through Canada should be dumped in favor of a liquefied natural gas (LNG) project that would ship gas to the Pacific Rim.

TransCanada Corp and partner Exxon Mobil Corp have been unable to win customers for the 1,700-mile natural gas pipeline they propose to build from Alaska's North Slope to Alberta.

The companies' plan, which has a price tag of up to $41 billion, is doomed by a major shift in natural-gas markets, said Parnell.

Booming shale gas production in the mainland United States is glutting markets there, while the Japan tsunami and other factors have created supply crunches in Asia, Parnell said, at an Alaska Oil and Gas Association conference in Anchorage.

"If market demand for gas has truly shifted from the Lower 48 to Pacific Rim markets, then the state of Alaska should be ready to shift along with that," said Parnell.

He said his call for a different pipeline plan -- a departure from the state's official position since the late 1990s -- reflects frustration with lack of progress.

"I don't think people in Alaska are going to wait forever to determine if the Lower 48 is going to generate demand for a pipeline," Parnell told reporters after his speech.

TransCanada in 2008 won an exclusive state license for the pipeline under the Alaska Gasline Inducement Act, legislation championed by former Governor Sarah Palin. The license grants TransCanada up to $500 million in state subsidies to help plan the line.

Exxon Mobil, one of the three major North Slope oil producers, joined the TransCanada project in 2009; the two companies proposed a line that would deliver about 4.5 billion cubic feet a day to Lower 48 markets.

A 90-day open season that TransCanada and Exxon ended in July of 2010 failed to attract any shipping commitments for yet-to-be-built gas pipeline.

BP and ConocoPhillips, the two other major North Slope oil producers, in May abandoned a rival natural-gas proposal for a similar route and similar delivery volumes after their 2010 open season also failed to attract shipping commitments.

Alaska's oil-rich North Slope holds known reserves of about 35 trillion cubic feet of natural gas, a resource stranded for lack of any system to deliver it to any market. Plans for a North Slope natural gas pipeline have been discussed for three decades, but economics has precluded any project.

The idea of exporting North Slope natural gas in LNG form has long been popular in Alaska. It envisions an 800-mile gas pipeline paralleling the existing Trans Alaska Pipeline that shipped North Slope oil since 1977, with LNG tanker vessels loading up at a liquefaction plant at the port of Valdez, to take it to Asia.

But an LNG project faces the same kind of economic challenges that have so far stymied a more conventional overland pipeline, said Matt Berman, a University of Alaska Anchorage economist. The Pacific Rim market is no more supportive of an Alaska project in the long run, Berman said.

"It's subject to the same uncertainties. Right now it's better, but that can change over the next five years as much as it changed in the Lower 48," he said.

Oil price direction “Something structural has changed in current fundamentals” Posted by Izabella Kaminska on Oct 28 15:56. John Kemp at Reuters has penned a cracking column on the current peculiarities afflicting the crude markets.

As Kemp notes, ask anyone in the market — specifically the physical market — and they will tell you the market is tight. Not just tight. Really tight. (And most likely that the recent backwardation reflects this tightness.)

He writes:

Hedge funds and other money managers remain convinced oil prices will rise. The ratio of money managers with long positions in WTI-linked futures and options to those running short positions remains 3:1, according to data released by the U.S. Commodity Futures Trading Commission (CFTC). For Brent futures and options, the long/short ratio is 1.77:1, according to Intercontinental Exchange (ICE), lower than earlier in the year but still bullish.

Physical traders are also bullish. “Bullish physical oil traders, who have been warning for months of a tightening market, have so far won the game against bearish macroeconomic hedge funds” as my colleague Javier Blas wrote in the Financial Times on Tuesday (“Swing in WTI price curve leaves oil traders reeling”, Oct 25).

Yet, despite all this bullishness, there is one inescapable fact. Prices have been trending lower:

That’s something that’s very hard to ignore, not least, as Kemp points out, because “sustained downtrends have been remarkably rare since the great upsurge in oil prices started in 2003?.

So what gives?

In Kemp’s opinion it could imply that some kind of structural shift is under way, one which is yet to be understood by the market at large.

As he notes:

It is not necessary to believe in either strong versions of the efficient markets hypothesis (EMH) or the forecasting power of technical analysis to perceive something structural has changed in current fundamentals or expectations about the future.

The downtrend started back in the late spring, long before there was an end in sight to the disruption of Libyan oil supplies, and also before the markets began to fully appreciate risks of a synchronised global slowdown.

Though he does offer some more conventional explanations tool:

The downtrend is probably due to a combination of factors: (a) expected resumption of Libyan oil exports; (b) cuts to projected global growth; (c) downward adjustments in forecast oil consumption; (d) liquidation of the record long positions in oil derivatives taken by money managers in late 2010 and early 2011; and (e) improved confidence in medium-term oil supplies as a result of tight oil and other technologies.

But if there is one indicator of “another” story to be told, we would say it’s this one:

The ratio of long to short position of managed money is still a very bullish 3:1 in light sweet crude, but it’s nowhere near the 10:1 ratio we saw in April/May just before the US debt ceiling debacle shenanigans began in earnest, and before QE came to a chortling end in July.

That peak in the ratio happens to in coincide with when the down trend in crude prices began.

Which is not surprising since it ties with a swift reduction in the length controlled by ‘managed-money’. If that length was the flip side to commercial shorts… and if their view didn’t change quite as quickly, it’s unsurprising that it translated to the choppy volatility we have seen since March and April. Physical wants to sell futures at a higher price than there is demand to supply futures, from managed money. That’s naturally either going to translate into a choppy ride lower on the flat price as futures converge with the physical (if the curve is to remain intact) or see the curve backwardate until the excess supply built up to support that managed money is flushed out.

As Kemp points out in comments here, by definition backwardation is a sign of tightness that is expected to be temporary. “If it was expected to persist, the curve would be in contango.”

The common shorthand that backwardation = tightness, contango = slack, is thus an oversimplification.

What bothers me about the demonstration was that the witnesses were lead one or two at atime back to the apparatus which was asserted to be in 'self-sustained mode' for a 2 to 3 minute glimpse at the machine. I don't think anyone can tell what an apparatus isdoing by just looking at it for 3 minutes. The mystery American investor who allegedly was satisfied with the test was never identified.

I'm reminded of other scams that I could recount where investors/witnesses where allowed to view a device that they didn't understand and couldn't possibly determineif it was really performing as claimed by just looking at it.

I have heard that observers of today’s tests are only being allowed to look at the equipment for a few minutes at a time, and they are not being introduced to the engineers who are taking the data. They are not being given a chance to establish the bona fides of these engineers, or to confirm that they are fully independent from Rossi.

If this is true then it goes without saying these results will have zero credibility.

If this is true then Rossi has once again taken a golden opportunity to convince the world his claims are true, and used it to make himself look like a crook.

I hope this is not true.

Whatever happens, I am sure we will get the full story. The reporters there can be relied upon to tell us the truth. If they are not allowed to interview the engineers and they cannot independently confirm the data, they will say so. I am sure Rossi knows they will tell the truth, so it seems unlikely he would impose such outrageous conditions. Unfortunately, he has often done outrageous things, such as telling people they are not allowed to measure the temperature with their own instruments.

This will have economic repercussions.Where will it stop? Companies worldwide have already cut to the bone and are operating on an economic knife edge. They cannot afford to be held at ransom by self-serving and unyielding unions.It will spread beyond airlines, guaranteed.S&P